Thirteen years ago a girl was born with birth injuries. Her parents sued the hospital for their daughter’s injuries, injuries that would forever alter her life and make her unable to live independently. They were relatively successful in that personal injury case, though their legal fight didn’t end with that negligence suit.

The court awarded the North Carolina family $2.8 million in damages for the child’s injuries, though the medical malpractice settlement didn’t get much more specific than that. Therein exists a problem that would contribute to continued legal stress for the plaintiffs.

Because of her injuries the child needed medical treatment, some of which was paid for by the state through Medicaid. When the family won its medical malpractice case, the state saw that as the go-ahead to collect the money that it had provided for the victim’s care.

Matters got complicated, however, when the state moved forward according to its North Carolina law that allowed the collection of one-third of a tort winner’s settlement. The family argued that one-third of its winnings (about $900,000) was an excessive payment to the state.

Federal law allows Medicaid to recover only enough money from a judgment to cover medical expenses. North Carolina’s clear-cut, one-third rule doesn’t necessarily jive with that federal regulation. Last week, the U.S. Supreme Court ruled in favor of the family, meaning that the laws must now match up and that Medicaid can’t recover more than exactly what it is owed.

The Supreme Court ruling impacts personal injury cases in all states, including California. Victims of medical malpractice and negligence of all forms just want to be able to move on with their lives after their cases are over. They should be able to take the full amount of the damages that they are owed and move forward without fighting with the government over financial details. This ruling provides guidance to prevent such situations.

Source: Reuters, “Supreme Court strikes down state Medicaid recovery law,” Terry Baynes, March 21, 2013